Bringing Business Stability and Maintaining Full Employment Conditions: Another

main objective of taxation is to bring about business stability and maintain full
employment conditions. Low rate of taxation during a business depression shall
accelerate more income to the people and help in raising demand and, thus, revive
business activity. On the other hand, high rates of taxes and additional taxes may
be useful to check inflationary pressure on prices. Thus, tax policy may be used as
a regulatory mechanism to achieve price stability, check business booms and
depression and also maintain full employment. Promoting Capital Formation: Another
objective of taxation is the promotion of capital formation. With particular
reference to underdeveloped and developing countries, One of the main objectives of
taxation is to make savings more dynamic and promote capital formation. In
underdeveloped countries, the savings can easily directed towards production and
capital formation through the assistance of taxation. Political Objectives:
Particularly in democratic countries taxation is used as a weapon for attaining
political objectives. For instance, lower and middle-class voters may be attracted
by imposing high taxes on rich people and luxury goods and nominal or no taxes on
goods consumed by poor and middle-class people.
Increase in National Income: Another objective of taxation is to increase the
national income. Tax is the main source of the government income. This income is
used for productive purposes and thereby overall production is increased. This
increase in production leads to increase in national income of the country along
with increase in per capita income. In underdeveloped countries, major part of the
income is spent on economic development programmes which too increases national
income as well as per capita income. Restrict Unnecessary Consumption: Another
objective of taxation is to restrict the unnecessary consumption particularly of
harmful commodities, such as wine.